The collapse in the gold price is the result of market manipulation by huge overseas bullion-price speculators rather than an end to the conditions which drove prices sky-high, says one local gold dealer.

Brent Hindman of New Zealand Mint, a private business which sells bullion to investors here and overseas, said there had been a lot of unnecessary hand-wringing over the recent gold price plunge while speculators would be happy with recent events.

The price crashed to US$1370 ($1628), the level gold was trading at in early 2011, from more than US$1690 in mid-February. In US dollars it is still more than 46 per cent up on 2011 prices but, with the stronger kiwi, New Zealand-based investors have taken a hit.

"The recent price weakness doesn't appear to have been driven by any dramatic change in economic or world stability issues," Hindman said.

"My guess is much of it has resulted from market activity by large precious-metal futures traders."

These speculators caused a massive shorting of the gold price and the worries that drove investors to gold as a safe haven in troubled times had not abated, he said.

"Cyprus and Europe are still a worry, US economic data remains relatively weak, China's growth is smaller than most thought, Japan has announced a programme of quantitative easing.," he said.

"Then there's been the reputed terrorist attack in Boston and at home there has been discussion about the shape of any Reserve Bank bailout that might happen.

"With all this going on, you'd think there would be a flight to gold, not from."

But if investors were long-term bulls on gold, they expect it to appreciate, they could still profit from taking a short position, Hindman said.

They could sell gold they did not have on the expectation others would do the same, drive down the price and then buy it back cheaper before they had to settle.

He said there was evidence that this had happened.

"There was some publicity last week implying Cyprus was considering offloading some gold reserves to stabilise its economic situation," he said.

"Soon after there were some large sell-offs of gold in New York which drove down the price.

"You could almost see the light bulbs go on above the heads of the speculators. Falling gold price equals short opportunity.

"Once the price dropped to US$1550, the sell-off accelerated and, before we knew it, we were down 15 per cent in four days at US$1330 an ounce."

The shorts were in paper profit, he said, and could bide their time before coming back in to cover their contracts.